End of Year Observations – 2019

End of Year Observations - 2019
2019 year in review
Image by Mohamed Hassan on Pixabay

There’s no doubt 2019 has been a challenging year for both tourism and real estate investments in Bali. But it’s also been very positive in how Indonesia is waking up to its enormous potential.

In the first half of 2019, the market was quiet slow. Many put this down to the presidential and provincial elections. This sense of caution continued into May and June with Jakarta seeing riots and some civil unrest while everyone was waiting for the final constitutional court decision on the contested results.

What we were thinking in April 2019

Have a look at what we were thinking about last April regarding Bali’s property and real estate market. There are two blogs: Part 1 and Part 2 that address the issue, basically coming to the conclusions that “we need to focus on words and initiatives around being Eco-friendly, encouraging upmarket and integrated tourism, implementing real spatial and urban planning with better and more consistent zoning.” And when I say ‘we’ I mean everyone in the real estate and tourism industries.

Election of Jokowi to his second term

When Jokowi secured his second term, the focus shifted to whom he would appoint to his new cabinet. I’m sure it raised a few eyebrows!

Here’s a blog we posted on what’s being called the Indonesia Onward cabinet 2019 – 2024 in October, which looks at the more ‘surprising’ appointments.

Indonesia Onward Cabinet 2019 -2024
Indonesia Onward Cabinet 2019 -2024

Omnibus Law geared to attracting investment

Since the cabinet was sworn in there has been a lot of work focusing on continuing to attract Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI).

Indonesia has launched several investment packages in the past but we feel these will not have the same kind of impact as the much-anticipated Omnibus Law is likely to have.

Here’s our contribution to Gapura Bali, which looks at the relaxation of expatriate Income Taxes, the axing of the Dividend Tax, a review of tax penalties and Corporate Income Tax, the Digital Economy Tax and the Netflix law.

The Omnibus Law is being driven by a team dominated by business people and a few ministries are fast tracking this. The Chair of the National Assembly has promised to resolve everything by April 2020 at the latest.

We think this will be the game changer Indonesia has been waiting for!

Trade agreements

Running along side these significant changes are the ratification of several trade agreements with EFTA, Australia and others.

The CEPA agreement with Australia is seen as being particularly important and both sides are excited about the opportunities. Here’s our contribution on this in Gapura Bali.

North Jakarta port Image by Tom Fisk on Pexels
North Jakarta port Image by Tom Fisk on Pexels

Waste and infrastructure

At long last, Bali has started to realize it seriously needs to deal with its waste management and infrastructure problems. We’re now seeing major programmes taking off from the provincial level down to the villages and several more are slated to be breaking ground in 2020.

There’s a real sense Bali is serious about making “Green the new Black.” Last January, Governor Koster introduced a regulation banning single use plastic bags in retail stores and supermarkets in Denpasar and it quickly gained traction across different industries and regencies.

We know there’s still an issue, but we’re encouraged by the fact that a start has been made. Let’s hope it gains momentum. Here’s what we think about some of these green initiatives.

Award winning destinations

Interestingly, even with these serious challenges, Bali continues to be a preferred destination on various travel platforms.

Villa Finder placed Bali as the #1 spot for villa rentals in Asia Pacific, saying the market has grown by 18-percent in the last two years, boasting more than 4,000-villas with a value of more than USD 162-million. Here’s our take on that in Gapura Bali.

According to Agoda, Bali, took the top spot on its list of winning cities or regions in 2019 and Travel + Lesiure Magazine rated Bali and Sumba as having Indonesia’s best resorts.

Conde Nast Traveler Reader’s Choice Awards also placed Indonesia as the #1 best country in the world to visit. It’s impressive stuff!

All this will hopefully bring new excitement into markets, both in Bali and other areas such as Lombok and Flores.

Labuan Bajo Image by Firman MPH on Pixabay
Labuan Bajo Image by Firman MPH on Pixabay

Investment roadmaps

We’re noticing new investors are more willing to comply with regulations and be honest with their taxes, which is a great sign and they’ve started to set up their structures properly from the get go, using PT PMA’s or various forms of JVC and PT PMDN.

If they’re investing in residential or retirement then a Hak Pakai title is the way to go.

There are still a lot of investors however, that have overly complicated set ups, and unfortunately, they’re getting caught up with taxation or permit issues.

These problems tend to be around “borrowing” someone’s Pondok Wisata license, or “borrowing an IMB,” which is in someone else’s name and then having a different entity operating the business. This is not the best way to do things!

A big problem with this is how it opens you up for two, or sometimes three levels of taxation, permit issues and sometimes being held to “ransom” by the nominee of a Pondok Wisata or other aspects of that structure.

Check out what we wrote about checking to see if your Bali is villa is legal and some not so far fetched possibilities about what could go wrong if you don’t do it right!

investment roadmap
Photo by rawpixel.com from Pexels

It’s definitely not the way to go, which is why we recommend developing an Investment Roadmap. You can read more about that here.

The bottom line

At Seven Stones we take great care to be totally transparent on the do’s and don’ts. And we always look at various options available to you and how you manage the risks involved.

The bottom line(s) is this …

  • make sure you fully own and control your asset in the best possible way,
  • then look at how management and related permits can be worked out,
  • and finally make sure you do tax planning NOT tax avoidance.

The Indonesian government is continuing to improve regulations and streamline the processes for investment from central government to the regency level. And for now, it’s taking a ‘soft’ approach to enforcing compliance.

Reach out to us anytime if you have any questions or would like to meet up for a chat to make sure 2020 becomes the best year ever.

Merry Christmas and a Happy New Year to you all and many thanks for your time and support. We hope 2020 will be a great year for us all!

Happy 2020 Image by Gerd Altmann on Pixabay
Image by Gerd Altmann on Pixabay

#sevenstonesindonesia #indonesiainvestment #2019wrapup #OmnibusLaw #Jokowi #baliproperty #balirealestate #gapurabali #greenisthenewblack #investmentroadmap #whatcouldpossiblygowrong #indonesiatrade #tradeagreements #taxlaws #easeofdoingbusiness #merryxmas #happynewyear

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Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.

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Ridwan Jasin Zachrie

CFO of Seven Stones Indonesia, Jakarta

Ridwan is one of Indonesia’s top executives with a long and illustrious career in the financial world. He holds several professional certifications including being a Certified Business Valuer (CBV) issued by the Australian Academy of Finance and Management; Broker-Dealer Representative (WPPE); and The Directorship Certification for Directors and Commissioners, issued by the Indonesian Institute of Commissioners and Directors.

His experience includes being the Managing Director at one of the top investment banking groups in the region, the Recapital Group, the CFO at State-owned enterprises in fishery industry and the CEO at Tanri Abeng & Son Holding. He’s also been an Independent Commissioner in several Financial Service companies and on the Audit and Risk Committee at Bank BTPN Tbk, Berau Coal Energy Tbk, Aetra Air Jakarta as well as working for Citibank, Bank Mandiri and HSBC. His last position was as CFO at PT Citra Putra Mandiri – OSO Group.

Ridwan has won a number of prestigious awards including the Best CFO Awards 2019 (Institute of Certified Management Accountant Australia-Indonesia); Asia Pacific Young Business Leader awarded by Asia 21 Network New York USA (Tokyo 2008); UK Alumni Business Awards 2008 awarded by the British Council; and The Most Inspiring Human Resources Practitioners’ version of Human Capital Magazine 2010.

He’s a member of the Board of Trustees of the Alumni Association of the Faculty of Law, Trisakti University, Co-Founder of the Paramadina Public Policy Institute and actively writes books, publications and articles in the mass media. He co-authored “Korupsi Mengorupsi Indonesia” in 2009, which helps those with an interest in understanding governance in Indonesia and the critical issue of corruption. Ridwan speaks Indonesian and English.

Per Fredrik Ecker

Managing Director of Seven Stones Indonesia, Jakarta

Per is the Managing Director of the Seven Stones Indonesia (SSI) Jakarta office and has more than 25-years’ experience in Indonesia, China, and Western Europe. He previously worked in senior management positions with Q-Free ASA, Siemens AG, and other companies in the telecom sector. Over the last six years, he has been the Chairman of the Indonesia-Norway Business Council (INBC) and recently become elected to be on the board of EuroCham Indonesia.

His most recent experience is within Intelligent Transport Solutions (ITS), Telecom, and other sectors within the Indonesian market. He is today through his position in SSI and by representing Norway Connect, promoting Nordic and European companies that would like to explore business opportunities in the Indonesian market. He’s also playing an active role to help create the Nordic House concept in Jakarta that will provide an excellent platform for Nordic companies entering Indonesia, where they’ll find a community that can offer support with trusted information and affordable services to enter this market.